The National Development Fund of Iran has rejected a proposal by private companies to resolve repayment of currency arrears at lower rates.
To put an to the NDFI’s struggle to collect its past debts, the Iran Chamber of commerce, Industries, Mines and Agriculture (ICCIMA) earlier in the week urged the NDFI to let loan defaulters repay their debt at rates much lower than the market.
In a press statement posted on its website, head of the public relations department of the sovereign wealth fund said the proposal if accepted would undermine NDFI financial clout.
“It will lead to devaluation and depletion of NDFI foreign currency resources and is not acceptable,” Alireza Kangarloo was quoted as saying.
NDFI is independent of the government. It was founded in 2011 to curb dependency on oil revenue and save a percentage of the earnings from oil and gas exports for future generations.
The fund lends to the nongovernment public sector, private firms and cooperatives in need when government revenues are low.
It appears that forex loan defaulters have been unable and unwilling to meet their financial commitments due to a combination of factors, namely the prohibitive rise in currency rates, the US economic blockade and rising production costs.
Most of the unpaid loans were borrowed years back when forex rates were much lower than today.
On several occasions companies have appealed to the NDFI to clear their debt either at the same rates when they had borrowed or at the least accept payment in rials. Both offers were dismissed by the powerful lender.
Kangarloo says most of the money was borrowed by companies that generate sufficient forex revenues and must be able to reimburse their debts without much difficulty.
“More than 73% of the unpaid loans belong to the oil, gas and petrochemical companies plus power plants. The oil/gas and petrochemical firms regularly export their products and can repay their debts,” he stressed.
Earlier Mehdi Qazanfari, the NDFI boss, pointed to power plants that have borrowed $4 billion from the NDFI and refuse to repay -- wanting to settle the issue by paying in rails instead of foreign currency.
Data released by the Central Bank of Iran indicate that non-performing forex loans far outweigh rial arrears. The NPL ratio was 13.2% for forex loans as of Dec. 21, posting 5.6% increase compared to the same period a year before.
For rial loans, the ratio was 5.4%, down 27% from the same period a year ago.
$10 Billion Outstanding
There is no official or reliable data on the exact amount of unpaid NDFI loans. But inquiries by ISNA (news agency) show it is in the region of $10 billion, of which the government owes $6 billion and private sector the balance.
This is while the articles of association of the sovereign wealth fund states that its resources must be more in the service of the private sector than the government.
As per law 80% of NDFI resources should be used to help fund private sector projects with non-governmental public entities allowed the rest.
How and why government-affiliated companies were able to borrow such huge amounts despite the clear NDFI mandate is not known.
In a press release seen on the NDFI website, Reza Mohammadi, head of NDFI’s department for contracts and debts, said earlier that the fund had collected an estimated $2.5 billion from private sector borrowers.
In the same vein, Alireza Mirmohammad-Sadeqi, the NDFI’s banking and credit deputy, says the difficulties in reimbursing loans, particularly forex loans, have emerged as a major challenge for the fund.
As per available data, the fund has invested $27 billion in oil, gas and petrochemical sectors, $13 billion in water projects, $5 billion in power infrastructure and $1.5 billion in promoting rural employment since inception in 2011.
